Foxconn, Nokia agree to revive Chennai plant

In its first formal communication to governt on the issue, Foxconn proposed to convert the Nokia plant into a global manufacturing hub for mobile phones.Gulveen Aulakh | ET Bureau | October 04, 2016, 07:16 IST

Foxconn Technology Group has reached an understanding with Nokia to revive its manufacturing plant near Chennai and has laid out tough conditions, including waiver of the Finnish company’s tax liabilities in India and resolution of legal issues at the state level, for a deal to be finalised.

In its first formal communication to the government on the issue, Foxconn proposed to convert the Nokia plant into a global manufacturing hub for mobile phones and telecom network equipment.

The plan may see the Finnish company staying involved in some form.

The world’s largest contract manufacturer wants the special economic zone in which the plant is located to be converted into a domestic tariff area at no cost to the companies, which will allow mobile phones and telecom equipment to be sold locally instead of only being shipped overseas.

The government would be paid through a ‘pay-per-phone-sold’ model over a period of time. The intent is to take the plant back to its previous peak capacity of 100 million phones a year.

Foxconn, which plans to invest $5 billion in India, also urged the Tamil Nadu government to declare the unit a state utility and handle all labour-related issues.

“A formal dialogue happened between Foxconn chairman and Nokia chairman a few weeks ago. Both of them are interested, but this revival project will need full support of the Tamil Nadu government and Government of India,” Foxconn said in a letter that was shared with the information technology and electronics secretary on September 22, after its executives met key department officials.

“Foxconn and Nokia could be working together to bring more business to the country and are capable of making India as the next global manufacturing hub for mobile phones and telecom equipment,” the company added.

ET has seen a copy of the letter, which was also sent to the Tamil Nadu industries secretary.

A senior official at the IT and electronics ministry, who did not want to be identified, confirmed the communication and said that Foxconn intends to create a “larger value proposition” in India.

Department officials are set to meet Foxconn Chairman Terry Gou this week in Taiwan to take the discussions forward. While Foxconn didn’t respond to queries, Nokia declined to comment on specific queries, saying only, “The asset freeze on the site needs to be lifted by government so we can find a suitable buyer.”

The Indian government wants to revive Nokia’s manufacturing plant in Sriperumbudur near Chennai, which was shut in late 2014 due to an ongoing Rs 21,000 crore tax dispute between the Finnish company and Indian tax authorities and led to the loss of more than 12,000 jobs.

The factory was excluded from Microsoft’s $7.2 billion purchase of Nokia’s global phone operations two years ago. Talks with Foxconn to consider taking over the factory started in June.

“The revival plan will be subject to asset freeze being lifted by the Indian revenue authorities, hence we request Indian government to ensure that Nokia’s tax liability should not be carried over to Foxconn,” the Taiwanese multi-product maker said in the letter.